What Can Storage Facility Owners do about Nonpaying Servicemembers?

If you are a storage facility owner or operator and you have a delinquent tenant who is also a military servicemember, you may wonder what forms of recourse you have.

You must tread carefully. One misstep, and you could find yourself on the wrong end of a Department of Justice lawsuit. The upshot of that could be fines reaching into the hundreds of thousands of dollars.

The SCRA and Storage Facilities

Congress passed the Servicemembers Civil Relief Act in 2003 in an effort to protect servicemembers on duty from the worries of paying bills back home. As such, this law provides active servicemembers with a wide range of protections. One of these relates to storage facilities.

Servicemembers cannot be tried in absentia, their lockers cannot be seized, double-locked, or contents auctioned without a court order. This includes contents, stored vehicles and much more. You must know if your tenant is a servicemember before going forward.

If you have not bothered to check about a tenant’s military status, you could be wasting your precious time and money by hiring a lawyer to get a court order. But, it it turns out that the tenant is on active duty and you don’t get a court order, and you skip the court process, you open yourself up to fines that will cost you even more.

How do you find out for sure if a person is a servicemember?

What the Government Allows Storage Facility Operators

Double-Locking, Liens or Auction? — There is nothing explicit in the SCRA about double-locking a unit and there is a split of opinion on whether this is permitted or not. Section 3958(a)(1) provides, in part that a “person holding a lien on the property or effects of a servicemember may not, during the period of military service of the servicemember and for 90 days thereafter, foreclose or enforce any lien on such property or effects…” [emphasis added and thank you to the Arizona Self Storage Association for their contribution to this article, although other state associations have differing interpretations]. Section 3959 (see below), imposes penalties if a person “detains the personal effects of a servicemember”. Regardless of whether you are permitted by law to double-lock, you may want to think twice about doing this if the tenant is under SCRA protection. The public relations aspect could be terrible and the US Department of Justice has just started an initiative to crack down on SCRA violators and a court may determine that a double-lock is a violation. In any case, beyond the self-help of double-locking, if the tenant is SCRA protected, you may not put a lien on it, auction or remove the contents, or foreclose on it without a court order. See, for example, Section 3959 of the SCRA that provides: “Any person who knowingly seizes, holds, or detains the personal effects, security deposit, or other property of a servicemember or a servicemember’s dependent who lawfully terminates a lease covered by this section, or who knowingly interferes with the removal of such property from premises covered by such lease, for the purpose of subjecting or attempting to subject any of such property to a claim for rent accruing subsequent to the date of termination of such lease, or attempts to do so, shall be fined as provided in title 18 or imprisoned for not more than one year, or both.”

Charge Interest — You may charge interest on the past-due balance. The percentage depends on each individual storage facility’s contract language. Interest cannot be exorbitant, however, or the government may charge you with usury.

Assess Fees — You can assess fees according to what you’ve outlined in your contract. Again, these cannot be excessive, or you open yourself up to litigation. Each state is allowed to set its own limits on interest and fees, so check with your state.

You may think that it would be easier to refuse to rent to military personnel. But this is a slippery slope. You can refuse to rent to them if they won’t sign an SCRA waiver. But if you just refuse to rent to them in general, you may face a discrimination lawsuit. Generally, a waiver has to be a separate document (not a clause in the rental agreement), must reference the rental agreement very specifically (for example, naming the operator, the tenant, and the date of the lease), state a clear waiver, and must be executed after the beginning of the military service date (or after the report date in the case of reservists).

Beyond that, if you operate near a military base and refuse to rent to the military, you could quickly find yourself out of business, due to a combination of few customers and bad publicity.

When Does the Servicemember’s Protection End?

Assuming that the servicemember has not signed an SCRA waiver, there can be no foreclosure without a court order during the person’s active dutyand for 90 days after the Active Duty Termination Date.

Where to Purchase your Military Status Verification?

Some sites suggest you go the through the DMDC, but that may not be a good option, especially if you do not have the tenant’s social security number. Only the SCRACVS (Servicemembers Civil Relief Act Centralized Verification Service) offers solid responses without the social security number. Only the SCRACVS provides affidavits and only the SCRACVS has telephone and chat support to help you navigate through the process. Responses are usually provided by email by midnight and the cost is $36.40. If your court requires an affidavit, the surcharge is $20, and it can be sent overnight.

A tenant may waive provisions of the SCRA, but the waiver cannot be included in the lease – it has to be a completely separate document. A self-storage operator may refuse to lease to a person who refuses to sign a waiver (as long as the refusal is not based on discrimination such as sex, race, etc.), but operators near military bases might decide against such a hard position to avoid negative publicity.

Storage facility operators who are owed rent want results, fast. But if the paperwork comes back showing your tenant is in the military, what should you do while you wait for your court date?

Attorney Roy Kaufmann serves as the Director of the Servicemembers Civil Relief Act Centralized Verification Service, located in Washington, D.C. As a recognized authority on the Servicemembers Civil Relief Act, Mr. Kaufmann has published hundreds of articles and hosted many webinars. His teachings help law firms and businesses to remain compliant with the SCRA rules and regulations so as to avoid costly fines.

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